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Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs Oei-05-12-00540

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Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs Oei-05-12-00540 Department of Health and Human Services OFFICE OF INSPECTOR GENERAL ANUFACTURER AFEGUARDS M S MAY NOT PREVENT COPAYMENT COUPON USE FOR PART D DRUGS Daniel R. Levinson Inspector General September 2014 OEI-05-12-00540 EXECUTIVE SUMMARY: MANUFACTURER SAFEGUARDS MAY NOT PREVENT COPAYMENT COUPON USE FOR PART D DRUGS OEI-05-12-00540 WHY WE DID THIS STUDY Pharmaceutical manufacturers offer copayment coupons to reduce or eliminate the cost of patients’ out-of-pocket copayments for specific brand-name drugs. The anti-kickback statute prohibits the knowing and willful offer or payment of remuneration to a person to induce the purchase of any item or service for which payment may be made by a Federal health care program. Manufacturers may be liable under the anti-kickback statute if they offer coupons to induce the purchase of drugs paid for by Federal health care programs, including Medicare Part D. The anti-kickback statute applies to all Federal health care programs, but this study focused on Part D. The use of coupons by Medicare beneficiaries could impose significant costs on the Part D program because many coupons encourage beneficiaries to choose more expensive brand-name drugs over less expensive alternative drugs. In two surveys by outside groups, approximately 6 percent to 7 percent of seniors surveyed reported using coupons to purchase prescription drugs. HOW WE DID THIS STUDY To identify the safeguards pharmaceutical manufacturers employ to prevent their copayment coupons from being used for drugs paid for by Part D and to identify vulnerabilities in those safeguards, we surveyed 30 manufacturers of the top 100 Part D brand-name drugs with coupons and with the highest Medicare expenditures. We also reviewed selected safeguards offered for a purposive sample of those drugs. In addition, we interviewed staff at various organizations involved in pharmacy claims transactions to understand other vulnerabilities associated with coupon use in Part D. WHAT WE FOUND Pharmaceutical manufacturers’ current safeguards may not prevent all copayment coupons from being used for drugs paid for by Part D. All surveyed manufacturers provide notices directed to beneficiaries and pharmacists that coupons may not be used in Federal health care programs. Most surveyed manufacturers use pharmacy claims edits to prevent coupons from being processed for drugs covered by Part D. Most of these edits may not prevent all coupons from being processed for Part D-covered drugs. Finally, Part D plans and other entities cannot identify coupons within pharmacy claims. WHAT WE RECOMMEND The Office of Inspector General’s concurrent Special Advisory Bulletin affirms that pharmaceutical manufacturers are at risk of sanctions if they fail to take appropriate steps to ensure that their copayment coupons do not induce the purchase of Federal health care programs items or services, including but not limited to, drugs paid for by Medicare Part D. For this reason, manufacturers may engage industry stakeholders and the Centers for Medicare & Medicaid Services (CMS) in an effort to identify a solution to ensure that coupons are not used for drugs paid for by Part D. CMS should cooperate with industry stakeholder efforts to improve the reliability of pharmacy claims edits and make coupons transparent. CMS concurred with our recommendation. TABLE OF CONTENTS Objectives ....................................................................................................1 Background..................................................................................................1 Methodology................................................................................................8 Findings......................................................................................................10 All surveyed manufacturers provide notices to beneficiaries and pharmacists that copayment coupons may not be used in Federal health care programs ......................................................................10 Most surveyed manufacturers use pharmacy claims edits to prevent copayment coupons from being processed for drugs paid for by Part D .............................................................................................15 Surveyed manufacturers’ pharmacy claims edits may not prevent copayment coupons from being processed for drugs paid for by Part D .............................................................................................17 Part D plans and other entities cannot identify copayment coupons within pharmacy claims .................................................................19 Conclusion and Recommendation .............................................................22 Agency Comments and Office of Inspector General Response .....24 Appendixes ................................................................................................25 A: Discussion on Data Collection and Analysis ...........................25 B: Agency Comments ...................................................................28 Acknowledgments......................................................................................29 OBJECTIVES 1. To describe safeguards pharmaceutical manufacturers employ to prevent copayment coupon use for drugs paid for by Medicare Part D. 2. To identify vulnerabilities in these safeguards. 3. To identify any other vulnerabilities associated with copayment coupon use for drugs paid for by Medicare Part D. BACKGROUND Pharmaceutical manufacturers offer copayment coupons to reduce or eliminate the cost of patients’ out-of-pocket copayments for specific brand-name drugs and thereby induce the purchase of those drugs. Although coupons reduce individual patients’ immediate costs, coupons may increase the cost of prescription drugs for health insurers, including those offering Medicare prescription drug coverage through Part D plans.1 The anti-kickback statute prohibits knowing and willful solicitation, receipt, offer, or payment of remuneration to induce the purchase of any item or service for which payment may be made in whole or in part under a Federal health care program.2 Pharmaceutical manufacturers may be liable under the anti-kickback statute if they offer coupons to induce the purchase of drugs paid for by Medicare Part D or any other Federal health care program.3 Recent surveys by outside organizations found that approximately 6 percent to 7 percent of surveyed seniors reported using manufacturer coupons toward their copayment for prescription drugs purchased through 1 Joseph S. Ross and Aaron S. Kesselheim, “Prescription Drug Coupons – No Such Thing as a Free Lunch,” The New England Journal of Medicine, August 28, 2013, http://www.nejm.org/doi/pdf/10.1056/NEJMp1301993. Accessed on August 30, 2013. David Grande, “The Cost of Drug Coupons,” JAMA, June 13, 2012, http://jama.jamanetwork.com/article.aspx?articleid=1182868. Accessed on June 14, 2012. These articles describe how the use of coupons to encourage brand-name drug utilization could increase insurers’ costs. This description applies to Medicare Part D, which uses an insurance model to provide prescription drug benefits. 2 42 U.S.C. § 1320a-7b(b). 3 “Federal health care program” is defined in the anti-kickback statute as “(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of title 5; or (2) any State health care program, as defined in section 1320a-7(h) of this title.” 42 U.S.C. § 1320a-7b(f). Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 1 their Medicare prescription plans.4, 5 Applying these results to the population of 36 million Part D beneficiaries, the utilization of copayment coupons to obtain prescription drugs paid for by Part D could exceed 2 million beneficiaries. Pharmaceutical manufacturers’ use of coupons to reduce the cost-sharing obligations for Medicare Part D drugs could impose significant costs on Federal health care programs and taxpayers. A 2013 study from The New England Journal of Medicine found that 58 percent of coupons were for brand-name drugs for which a lower cost generic alternative was available.6 If manufacturer coupons encourage Medicare beneficiaries to obtain more expensive brand-name drugs when lower cost alternatives are available, the coupon may reduce individual beneficiaries’ immediate out-of-pocket costs but Part D plans’ and the Part D program’s costs may increase, ultimately increasing costs to taxpayers.7 Medicare Part D Cost Controls CMS contracts with private insurance companies, called sponsors, to provide Part D prescription drug benefits for approximately 36 million beneficiaries.8, 9 Sponsors use a variety of methods to control prescription drug coverage costs through the Part D program. Part D Formularies. Sponsors can establish formularies, or lists of covered drugs, to give preference to more effective drugs over less effective drugs or less expensive drugs over more expensive drugs that treat the same condition. To drive utilization toward equally effective but less expensive drugs, formularies are generally organized into tiers, which have different beneficiary copayments for a prescription drug. Drugs in lower tiers are typically the least expensive and have the lowest beneficiary copayments. Drugs in the subsequent and ascending tiers are, 4 National Coalition on Health Care
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